In my final year at school I took economics. I had a fantastic teacher, Mr Girvan, who wasn't afraid to point out that rational economic theory forgets compassion. In learning about supply and demand, within the context of a make-believe pandemic, we talked about how the rich would get richer, and the poor poorer. In our simple example, supply of medication being limited, and the virus being prolific, the price of medication would be driven upwards until supply met demand. This was a lesson in the basic principle of economics: scarcity.
Scarcity meant those who could not afford the medication, did not get it. If the virus was deadly, the lives of the poor were at risk - or, if they chose to stay home to protect themselves, their jobs and incomes were. Scarcity could single-handedly drive wealth and poverty. And, in the wrong economic climate, it could drive them miles apart. Thus, an economic version of Darwin's 'natural selection' played out, right there in the classroom.
That example is now our reality.
In COVID, the scarcity of ventilators, nurses and PPE mean continuing restrictions, to ensure hospitals aren't overloaded. Social distancing and travel bans have seen hospitality and tourism nosedive, putting millions out of work. For many, lost income means reliance on government funding, to make ends meet. In contrast, those with excess cash are profiting from shifting markets, reeling in larger-than-usual paydays. Scarcity is driving an expanding chasm between rich and poor, making ever more urgent the need to boost fragile markets and restore millions of jobs.
The economic future in COVID looks bleak. But, in the years since Mr Girvan's lesson, new ammunition has emerged. We now have sophisticated algorithms and ubiquitous online platforms. And we can use these to take fiscal strategies digital.
To date, analogue approaches have included wage packages, mortgage delays and superannuation access - depression-era strategies designed to stimulate demand and increase spending. In Victoria, Australia's hardest hit state, early lockdowns exempted construction work, a significant economic multiplier. Then, when socialising reconvened post-lockdown, private social gatherings were limited, but in restaurants they remained viable.
These cleverly thought out actions have cushioned the short term blow of COVID. Small businesses are making use of jobkeeper, and 3.5 million Australians are collecting jobseeker, putting cash in the hands of consumers. Retailers are reaping the rewards. Retail spending increased 8.2% (YoY) in the month of June, despite an increase in unemployment figures nationally.
But, with Government purse-strings tightening, and jobseeker access expected to shrink by two thirds, cash lifelines aren't long for this world. Economists expect a drop-off in spending and are bracing for the months ahead. Governments and businesses alike may be forced to look at new ways to rejuvenate buyer sentiment. And a cost-effective, scalable bet is to leverage data and digital technology.
Five years ago, I wrote my university thesis on social algorithms, algorithms that adapt and respond to an individual's social media activity. Specifically, I wrote about how these algorithms could be utilised to forecast trends and determine buyer preferences in the fashion industry. Then, with enough data gathered, used again to adjust the content buyers see, influencing consumer purchases, and setting future trends.
You know those ads that pop up for a handbag you actually want to buy? Or content showing your favourite influencer, sporting products you just have to have? These are targeted to influence your taste and preferences, based on your online activity. And they aren't just relevant to fashion, they are applicable to anything a consumer might want to buy or do.
Social algorithms enable businesses to target relevant consumers, or tailor content to potential consumers in a compelling way. Because of this, ads and shoppable content on social media platforms have a high conversion rate, encouraging consumer spending without extortionate investment from businesses. And, with 79% of Australians and 40% of the global population on social media, the capital cost - a very large investment of consumer data - is already well and truly supplied.
Thousands of companies around the world are already harnessing social algorithms to drive sales in a scalable manner, proving these algorithms are smart enough to be effective. However, an estimated 40% of Australian small businesses don't yet have a social media strategy. Businesses that could be leveraging social platforms to drive fiscal action and side-step the worst of an economic downturn.
By embedding their trade in platform economies, these businesses could be leveraging advertisements, paid content, influencer-selling and many other forms of consumer engagement, harnessing social media as the key conduit for driving sales. And governments can assist, too. They can implement incentives to upskill workers or subsidies for businesses implementing social media strategies.
Widespread social media uptake may even slow diverging inequality, by assisting business survival and putting money in the pockets of numerous Australians.
Too soon to call Facebook's algorithm a modern-day Robin Hood? Matching needy businesses to disposable income may make them money, but it will save jobs in the time of COVID.
